SHRI CDR, UDAI SINGH,BHOPAL vs. THE ACIT 3(1), BHOPAL

आदेश /O R D E R

PER SHRI D.T. GARASIA, JM

This appeal has been filed by the assessee against the

order of the learned CIT(A)-II, Bhopal, dated 30.9.2014.

CDR Udai Singh ITA No. 791/Ind/2014 2. The short facts of the case are that the assessee is a

Defence Officer belonging to Indian Navy. During the year

under consideration he was posted as Commodor and In-

charge of the Bhopal unit of NCC. The assessee did not

declare short term capital gain on sale of two immovable

properties during the year, therefore, the addition of

Rs.36,13,794/- was made on account of undeclared short

term capital gains and penalty proceedings were initiated.

In reply to show cause notice, the assessee has submitted

as under :-

“The return of income for A.Y. 2010-11 was filed on

30.07.2010 declaring a income of Rs. 15,97,530/-. In this

case the assessment was completed under section 143(3) of

income tax act on 25.03.2013 and income was assessed at

Rs.,52,11,320/-. An addition of Rs. 36,13,794/- was made

on account of Long Term Capital Gain arose on the sale of

two immovable properties.

CDR Udai Singh ITA No. 791/Ind/2014 2. During the course of assessment, penalty proceedings

were initiated under section 271(1)(c) of the Income tax Act

on account of non disclosure of Short Term Capital Gain

ofRs. 36,13,794/- in the original return of income filed by the

assessee. A notice u/s 271(1)(c) dated 25.03.2013 was

issued and the assessee was show caused as to why

penalty should not be levied. But neither anyone appeared

nor any reply was filed. Due to change in incumbency,

assessee was issued another show cause notice u/s

271(1)(c) on 17.07.2013, and hearing was fixed on

22.07.2013.

assessee sought an adjournment and finally filed a written

reply dated 16.09.2013. Certain point of assessee’s reply

are being reproduced as under for ready reference :-

“1. From this year the assessee a retired Defence

Officer, changed his IT counsel and engaged the

CDR Udai Singh ITA No. 791/Ind/2014 services of Shri Seemant Kala, Adocate. While filing the

return, Shri Kala asked for details of the immovable

property. Full details were not available with the

assessee at that time. He merely stated that the

property sold was old. The assessee did not know of

STCG & LTCG. He further stated that his wife is also an

earning member and IT payer whose funds may be

included in the purchase consideration besides three

other persons who contributed total Rs. 21,00,000/- for

the immovable property purchased for Rs. 35,90,225/-.

He had confusion whether it was to be treated as HUF

property or property belonging to an AOP, though

purchased on his name. The ld. Counsel filed the return

accordingly on 30.07.2010. The assessee had bona fide

belief that sale of the immovable property is immaterial.

It was only when a questionnaire dated 19.11.2012

from the ld. Assessing Officer was received that the

CDR Udai Singh ITA No. 791/Ind/2014 counsel insisted for the details of sales of the property.

A revised computation of income was accordingly filed

showing short term capital gains.

additional income by the department. The department

did not possess any evidence in this regard. It was a

voluntary declaration by the assessee after examining

the facts again. Compliance in this regard could not be

made on 04.12.12 since the assessee was pre occupied

due to terminal illness of his father in law who was

totally dependent on the assessee and staying with him

(father-in-law expired on 05.01.2013 – in proof thereof

evidences enclosed) and as the gathering of facts took

time. The revised computation was filed on 18.12.2012

on verification of the material.”

of the view that the assessee has engaged the services of

CDR Udai Singh ITA No. 791/Ind/2014 tax consultant Shri Seemant Kala, Advocate, and he has

represented the assessee. The Assessing Officer asked the

assessee to give details but the assessee could not produce

the details during the assessment proceedings. Therefore,

this contention of the assessee is not acceptable. In respect

of the assessee’s contention that he has voluntarily offered

his income during the tax proceedings is not acceptable

because a questionnaire dated 19.11.2012 was received

from the Assessing Officer and thereafter the assessee has

filed the details and offered the additional income.

Therefore, the Assessing Officer has levied the penalty. The

learned CIT(A) has confirmed the same.

the penalty has been levied on the ground that the

assessee has not offered short term capital gains on sale of

two properties. The assessee has revised the return but it

was barred by limitation but the assessee has deposited

CDR Udai Singh ITA No. 791/Ind/2014 self assessment tax to avoid levy of penalty. The assessee is

an Officer in Indian Navy. During the general query raised

by the Assessing Officer the assessee has filed complete

details and he has revised the return showing short term

capital gains on sale of two lands and copies of purchase

and sale deed were submitted. The assessee submitted that

the assessee has entered into sale agreement and also

obtained the power of attorney. The said land was not

registered in the name of the assessee and the said

property was not transferred to him and, therefore, the

assessee was under the impression that the liability of

short term capital gains should be on the owner of the

land. Moreover, when the Assessing Officer asked specific

information regarding immovable property, the assessee

has voluntarily submitted the revised return. Moreover, the

assessee is a defence Officer in the Indian Navy. He was

coming from the outside world and he was totally ignored

CDR Udai Singh ITA No. 791/Ind/2014 of the provisions of the Income Tax Act, therefore, it was

his bonafides. Therefore, penalty should be cancelled.

orders of the authorities below. The learned DR submitted

that the assessee has earned short term capital gains in

respect of two immovable properties which were acquired

on 22.1.2008. As per AIR information, the assessee’s case

was taken up for scrutiny. The assessee has paid due

taxes. Here in this case, the assessee has revised the

return after inquiry by the department and the penalty is

rightly levied.

circumstances of the case, we find that in the instant case

it is an admitted fact that the penalty proceedings were

initiated by the Assessing Officer wherein the assessee has

taken the contention that he is a retired Defence Officer

and he has engaged the services of Shri Seemant Shri

CDR Udai Singh ITA No. 791/Ind/2014 Seemant Kala, Advocate. While filing the return of income

Shri Seemant Kala has filled details of immovable

properties. He stated that the property was sold and in

pursing the property, many other persons have also

contributed. Therefore, he was under confusion that it may

be treated as HUF property or AOP. The assessee is a

retired Naval Officer and he has come from an outer world.

Therefore, he was not able to pay taxes to show the short

term capital gains. We find that the assessee himself has

offered the same before detection by the department.

Moreover, similar issue had come up before the Hon'ble

Delhi Tribunal in the case of ACIT vs. Ashok Raj Nath; ITA

No. 2970/Del/2012 wherein the Tribunal after considering

the decisions of various High Courts has deleted the

penalty by observing as under :-

“8. We have heard the ld. DR and gone through the facts of the case. As is

apparent from the aforesaid facts, the AO levied penalty u/s 271(1)(c) of the

CDR Udai Singh ITA No. 791/Ind/2014 Act in respect of an amount of `60,39,824/-comprising addition on account

of rental income-`4,63,388/-;disallowance of interest-`2,51,507/-,addition

towards short term capital gains on sale of properties-`10,50,950/-;short

term capital gains on sale of shares-`1,60,503/- and long term capital gains-

`40,98,919/-. The ld. CIT(A) cancelled the penalty on the ground that

disallowance of interest was deleted by the ITAT while issue relating to

addition towards rental income had been restored to the file of the AO and

additional income towards capital gains on sale of properties and shares

was disclosed by the assessee suo motu during the course of assessment

proceeding. The assessee submitted revised return since in the original

return long term capital gain on UTI liquid plus fund institution plan was

claimed exempt u/s 10(38) of the Act as also to reflect correct figures of sale

of land at Kheri Sadh and rental income. Merely because the assessee

disclosed additional income suo motu after issue of a notice u/s 143(2) ITA

No.2970/Del./2012 10 of the Act, does not amount to detection of

concealment by the AO. Apparently, the assessee had given all particulars

of his income and had disclosed all facts to the AO during the assessment

proceedings.. It is not the case of the AO that in reply to a query of the AO,

some new facts were discovered or the AO had dug out some information

CDR Udai Singh ITA No. 791/Ind/2014 which was not furnished by the assessee. In such circumstances, we are of

the opinion that no penalty is leviable. It is well settled that assessment

proceedings and penalty proceedings are separate and distinct and as held

by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah &

Co. Vs. CIT, 123 ITR 457, the finding in the assessment proceedings cannot

be regarded as conclusive for the purposes of the penalty proceedings. It is,

therefore, necessary to reappreciate and reconsider the matter so as to find

out as to whether the addition made in the quantum proceedings actually

represents the concealment on the part of the assessee as envisaged in sec.

271(1)(c) of the Act and whether it is a fit case to impose the penalty by

invoking the said provisions. It is also well settled that the criterion and

yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are

different than those applied for making or confirming the additions. The

Hon’ble Kerala High Court in the case of CIT v. M. George & Bros. [1986] 160

ITR 511 held that where the assessee for one reason or the other agrees or

surrenders certain amounts for assessment, the imposition of penalty solely

on the basis of the surrender will not be well-founded. Hon’ble Punjab and

Haryana High Court in the case of CIT v. Suraj Bhan [2007] 159 Taxman 26

while following the decision in CIT v. Suresh Chandra Mittal [2001] 251 ITR

CDR Udai Singh ITA No. 791/Ind/2014 9(SC), held that when an assessee files a revised return showing higher

income and gives an explanation that he offered higher income to buy

peace of mind and avoid litigation, penalty cannot be imposed merely on

account of higher income having been subsequently declared. The Hon’ble

Apex Court in CIT v. Suresh Chandra Mittal, [2001] 251 ITR 9/119 Taxman

433, upheld the decision of the Hon’ble Madhya Pradesh High Court

rendered in the case of CIT vs. Suresh Chandra Mittal [2000] 241 ITR 124,

where in similar circumstances it was held that the initial burden lies on the

revenue to establish that the assessee had concealed ITA

No.2970/Del./2012 11 the income had furnished inaccurate particulars of

such income. The burden shifts to the assessee only if he fails to offer any

explanation for the undisclosed income or offers an explanation which is

found to be false by the Assessing Officer.

8.1 In Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib),

the ITAT Lucknow Bench 'A' held that "mere raising of query by the

Assessing Officer did not amount to detection of concealment. It cannot

therefore, be said that the revised return was filed after detection of

concealment and was not voluntary. The term "detection" itself implies the

Assessing Officer had reached a conclusion but the query raised by the

CDR Udai Singh ITA No. 791/Ind/2014 Assessing Officer was only first step in detection of concealment. If the

assessee voluntarily revised the return, it could not be said that it does not

fulfill requirements of section 139(5) of the Act." The facts of the present

case are also similar to the facts of the aforesaid referred to case.

8.2 Similarly, in the case of Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831,

the ITAT Lucknow Bench 'A' held that "the assessee had surrendered the

amount before any specific detection of undisclosed income or even before

the issue of notice. Even though a general enquiry was going on and notices

had been issued to some of his relatives and the amount might have been

surrendered because of compulsion of circumstances, it was not sufficient to

penalise the assessee as the factum of detection was not there." In the

instant case also, nothing is brought on record that there was any detection

at the level of the AO to suggest that the assessee concealed the income on

account of capital gains, which was offered for taxation suo motu in the

revised return.

8.3 Merely because a notice u/s 143(2) had already been issued and the

assessee filed revised return thereafter, disclosing additional income

towards capital gains, which was not correctly shown in the original return,

does not tantamount to detection of concealment of income u/s. 271(1)(c)

CDR Udai Singh ITA No. 791/Ind/2014 of the Act . ITA No.2970/Del./2012 12 Hon’ble Madhya Pradesh High Court

in the case of CIT v. S.V. Electricals P. Ltd., 155 Taxman 158 and Hon’ble

Jharkhand High Court in CIT v. Ashim Kumar Agarwal, 153 Taxman 226 held

that where the assessee surrenders his full income, though at a later stage,

there was no question of any concealment on his part and consequently, no

penalty under Section 271(1)(c) was leviable, and that a omission from

return of income did not amount to concealment. Hon’ble jurisdictional

High Court while adjudicating the issue of levy of penalty u/s 271(1)(c) of

the Act in the case of CIT vs. Harnarain in their decision dated 31st

October,2011 in ITA no.2072/2010 concluded that “surrender of the amount

by the assessee after receipt of the questionnaire could not lead to an

inference that it was not voluntary, in the absence of any material on record

to suggest that it was bogus or untrue. It is further evident that there was

neither any detection nor any information in the possession of the Revenue

which might lead to a conclusion that there was a detection by the Revenue

of concealment. Accordingly, the question of law framed is answered

against the Revenue and in favour of the assessee.”

Respectfully following the above order of the Tribunal, we

delete the penalty. 14

CDR Udai Singh ITA No. 791/Ind/2014 7. In the result, the appeal of the assessee is allowed.

The order has been pronounced in open Court on

19th January, 2017.

Sd/- Sd/-

(ओ.पी.मीना) (डी.ट�.गरा�सया) लेखा सद�य �या�यक सद�य (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member

�दनांक /Dated : 19th January, 2017.

Dn/